Senate Passes the Endless Frontier Act

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McDonnell Boehnen Hulbert & Berghoff LLP

[co-author: Carlton Hemphill]

In a rare showing of bipartisanship, the U.S. Senate has passed Senate Bill S.1260, the "Endless Frontier Act."  Co-sponsored by senators Schumer, Young, Hassan, Collins, Coons, Portman, Baldwin, Graham, Peters, Blunt, Daines, Van Hollen, Romney, and Kelly, the bill most notably seeks to establish "a new Directorate for Technology and Innovation in the National Science Foundation [and] to establish a regional technology hub program."

The goal of these efforts is to increase U.S. capabilities in key technology areas that are believed to be able to provide the country with a competitive advantage in the global economy.  The bill outlines doing so in a way that increases diversity and inclusion in STEM fields while reducing the geographic concentration of R&D and the STEM workforce.  If signed into law in its current form, Congress will be able to authorize just short of $250 billion in funding for R&D, education, technology transfer, and intellectual property over the course of five years.

The key technologies listed are:

(A) Artificial intelligence, machine learning, autonomy, and related advances.

(B) High performance computing, semiconductors, and advanced computer hardware and software.

(C) Quantum information science and technology.

(D) Robotics, automation, and advanced manufacturing.

(E) Natural and anthropogenic disaster prevention or mitigation.

(F) Advanced communications technology and immersive technology.

(G) Biotechnology, medical technology, genomics, and synthetic biology.

(H) Data storage, data management, distributed ledger technologies, and cybersecurity, including biometrics.

(I) Advanced energy, batteries, and industrial efficiency, including advanced nuclear technologies for the purposes of electric generation.

(J) Advanced materials science, including composites and 2D materials.

One significant focus of the bill is to ramp up domestic semiconductor development and manufacturing.  Due to the COVID-19 crisis, multiple industries are being impacted by a chip shortage, and the bill allocates approximately $52 billion in assistance to semiconductor manufacturing companies.

Specifically regarding patents, the bill permits entities engaged in academic technology transfer to use awarded funding to offset the cost of patenting and licensing their research efforts.  Further, granted patents may be used as a metric in determining the effectiveness of funding allocated to regional technology hubs.  For the manufacturing and industrial sectors, the bill states that:

Federal patent policies should be developed, based on uniform principles, which have as their objective to preserve incentives for industrial technological innovation and the application of procedures that will continue to assure the full use of beneficial technology to serve the public.

Notably, the bill in its current form places no additional requirements on the USPTO.  Further, the bill does not address the current judicial assault on the patent-eligibility of certain types of software and devices.  Inventions in a number of the listed key technology areas have an above-average chance of being viewed as ineligible for patenting under current Supreme Court and Federal Circuit jurisprudence.

In addition to its apparent (though somewhat tepid) support of patenting, the bill requires that intellectual property developed through its funding cannot be transferred to any foreign entity of concern, any U.S. subsidiary of a foreign entity of concern, and any for-profit, or non-profit, partnership that includes a foreign entity of concern.  Foreign entities of concern include foreign terrorist organizations, any "specially designated nationals and blocked persons" as listed by the Department of Treasury, governments engaged in certain types of espionage against the U.S., governments to which export of arms is controlled, and certain other types of entities.

Specific provisions restrict funding or consortium membership to companies or organizations of the People's Republic of China or companies over which the People's Republic of China is deemed to have an undue amount of control.  These and other provisions have already caused the bill to be criticized by that country's foreign ministry.

The bill has its domestic detractors on both the left and the right.  Liberals, such as Senator Bernie Sanders, have complained that the bill hands over billions of dollars to already-wealthy high-tech companies without giving the American people a piece of that pie.  On the other hand, conservatives, such as Senator Rand Paul, criticized the National Science Foundation as engaging in "wasteful spending" and appear to prefer a private-sector, free-market response.

Nonetheless, the bill passed the Senate 68-32, and has the support of President Biden.  The bill still has to clear the hurdle of the House of Representatives, where the Democrats have a slim majority but also a very vocal progressive caucus that might push for an approach that mitigates the concerns of Senator Sanders.

Large government spending programs like the one set forth in the Endless Frontier Act have historically been drivers of U.S. innovation, including the Apollo moon missions and the development of the Internet.  In 2020, U.S. government funding of R&D slid to 0.7% of GDP, whereas such spending peaked at 2.2% in 1964.  In contrast, China's R&D was 2.4% of its GDP in 2020.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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